Is investment in mutual funds safe?

Want to know if mutual funds are safe? Confused about whether to quit or stay invested? Find advice from experts here and resolve your query.

I have a running SIP in ICICI PRUDENTIAL VALUE DISCOVERY FUND(G) for the past one year. However I am worried about it's performance now, i tis not good for one year. What to do now? Should I quit or stay invested? My aim is to create wealth after 25 years.

A few things should be examined prior to investment in SIP. These are as follows- 1) Analyse the past performance of the portfolio and if the results are consistent for some specified period, we can opt for investment.2) SIP investment is benificial for the long time of duration provided the right portfolio is chosen.3) SIP funds should be chosen in such a manner that total investment should not be made in a single corpus , rather investment should be made in different portfolios such as equity - balanced fund, debt - fund, mid - cap fund etc so as to offset the loses of any portfolio with the other one.4) So, instead of putting the money in the same basket, go ahead for different portfolios.5) You have chosen the right plateform by choosing ICICI prudential SIP fund but you need to diversify your money in different funds.

The type of fund decides how much safe it is. For example debt funds are slightly a bit more secure to invest into than the equity. You can see that the risk is dependent on market. So equity funds get quickly gets affected daily. And they can also give better return over a period of time. SIP can remove some extent of the risk. But it can also increase the loss depending on market condition. Lump-sum and SIP both are pretty on par in most typical financial conditions. So SIP is a good option only for systematic investment.

In terms of risk and rewards, debt fund have low risk and low reward, mid range funds, hybrid and index funds are mid risk and mid reward type. And equity and blue chip funds have their high risk and reward. That's how the mutual funds are working out for safety.

There are two types of mutual funds - one which invest its corpus mainly in equities while the other one in debt instruments.

We must understand that Mutual Funds are investing in the market so they are dependent on the market conditions. If there is an overall increment in the markets Mutual Funds will also be giving good returns to its investors but at the same time due to some adverse reasons if markets slide down the mutual funds will also follow them.

The equity Mutual Funds are worst affected in such conditions but they also perform very brightly if markets go up.

On the other hand the debt related investment do not show such big following to the markets.So these Investments are to be seen for their risk profile before taking a judicious investment decision.Thoughts exchanged is knowledge gained.

Mutual Funds provide a support and help for reducing risks associated in investing in stock markets for those who do no have experience and expertise on stock market investment.As the MF s have their fund managers who are qualified and experienced specialists in the filed, they know the various parameters, analyse and review the signals received from market and from other sources, and plan their investment strategy accordingly to safeguard their company's interest and increase revenue and profits. By being a small part of the larger investment (by buying the mutual fund units), we also get the benefits and pay a small charge for those services. However as our direct investment is limited to the units, even when losses occur we do not get big shocks, as the same is spread among various investors. For the same reason, we may get only reduced returns than when we would have invested directly in stock market.

To have some good return one should stay invested for a reasonable long term. The stock market may fluctuate every day, week after week. But as retail investors in MF, one should not panic or react to every change in the market price. Short term evaluation may not reflect the real performance. The rate of CAGR for a long period may give some trend or signal about the fund performance. If the long period (say 5 yrs) CAGR rate is more than the bank deposit rates by a few percentage points, and real return is more than the inflation rate then that can be held on.

Value MF are seen to deliver better performance in long term. So you may wait for some more time to take a quit/swap decision.If you don't feel confident, further investments you may invest in other funds or other category funds of the same fund house.

Investing in mutual funds is safer than investing in shares.Investing in mutual funds is unsafe than in bank FDs.But the returns are also in the same proportion.If you invest in shares you may get a very quick money or you may lose. This all depends on your understanding about the share market.Instead of investing in you can invest mutual funds. There are two types of mutual funds.one mainly invests in equities while the other one invests in debt instruments. It is advisable to invest in the mutual funds which invests debt instruments where there is a minimum risk.But what suggest is you can take the advice of those people who will have very good understanding about various MFs available and which is better. The returns always depends on market conditions and fund performance. You should be watching and you should withdraw at an appropriate time.drrao always confident

Mutual Funds are not like the schemes of bank and post offices for fixed deposit or national saving certificate. Mutual Funds are market driven instruments as their corpus is invested in share market or bond market. Depending on the type of mutual fund the major part of its corpus will be invested in shares or debt instruments.

The performance of the mutual fund depends on the market movement as well as selection of equities and bonds by its fund manager. Within the same boundary conditions of the market one fund can perform differently than the other.

We have to monitor the performance of a fund by comparing it with other funds in the same category as well as with other category so that we can take a decision to swap it with other fund.

Mutual Fund investments are risky investments depending on various factors. At the same time in a rising economic environment and good market condition they fetch more return compared to traditional investments like bank FD.Knowledge is power.

Investing in the Mutual fund should not be a short term plan .Whenever you buy you should think in terms of long duration. One year is very less time to judge about the performance of the mutual fund. Next time whenever you invest in mutual fund I would like you to please take the following concepts in mind: _1) See the past performance of Net Asset value of the mutual fund.2) Invest in a fund middle cap, small Cap or large Cap which you feel will raise based on analysis in the newspaper.3) You can also choose a stream like the Pharma fund, Finance fund, Information Technology etc.4) Please do not judge the mutual fund in a short duration.5) Be in touch with the news happening so that you invest in the right set

So far as the particular fund (in which you invest) is concerned, it can be stated that it invests in value stocks. In this type of fun, the investor has to be patient and must have complete faith on the manager's ability to identify value stocks. So far as time period is concerned, one year or so is too short a period to invest in any type of equity fund, especially value-based fund.

As your time-horizon is 25 years, I think you should not be unduly worried about the performance of the fund for one year. Go on moniotring the performance in every six months and invest systematically through SIP. You have to critically analyse the performance of the fund after 10 years or so, and if you find the performance is below the average, then gradually shift your holding to a good balanced fund.

Stay invested for now. Go on investing through SIP.Beware! I question everything and everybody.

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